Why does a surprisingly large number of newly appointed leaders fail?

Let’s look into the problem of Coca-Cola’s long-time CFO M. Douglas Ivester who had no choice but to resign after two and a half years as a successor of Robert Goizueta, and see how to avoid the same issues in your organization.

Ivester was experienced in at least one management area, but he failed because he hadn’t “mastered more general competencies such as public relations, designing and managing acquisitions, building consensus, and supporting multiple constituencies”, Jay. A. Conger and Robert M. Fulmer point out in Developing Your Leadership Pipeline. And Ivester isn’t the only example.

For decades, there have been warnings about the high percentage of companies’ leaders being in their late 50’s or early 60’s. In 2008 to 2012, the recession followed and companies reduced or stopped hiring. Consequently, the usual movement among managers and executives drastically dropped since these leaders rather held on to their current positions than risk and lose their jobs during the recession, says Jack Zenger in Developing A Leadership Pipeline That Works.

To avoid the lack of appropriate candidates in your organization, check out the five rules by Conger and Fulmer to establish a succession management system in your organization.

Rule One: Focusing on Development

As noted by Harvard Business Review, the fundamental rule is that the management of succession must be “a flexible system oriented toward developmental activities. By marrying succession planning and leadership development, you get the best of both”: the focus to the skills necessary for senior management positions and the system of education and training to help candidates to learn and evolve develop those skills. This might have helped Coca-Cola, but “Ivester was given the top job largely as a reward for his financial savvy and years of loyalty to Goizueta and the company; but not enough attention was paid to how his particular skills might apply to the broader role”, comment Conger and Fulmer.
American global pharmaceutical company Eli Lilly organizes an action-learning program twice a year. It brings together potential leaders, chosen by line managers and the HR managers, and the focus is on one strategic issue chosen by the CEO. The risks are reduced by placing someone with strong experiences with the chosen employees.
These kinds of programs provide experiences for the leading positions candidates and ensure a work product useful for the organization as well.

Rule Two: Identifying Linchpin Positions

The systems of succession management should focus intensely on linchpin positions — the positions essential to the company’s long-term health, as the authors point out. It’s usually difficult to find the appropriate candidate for those positions.
The plant manager is a linchpin positions in Sonoco Products, a global provider of packaging products and services. They consider this position as the first in line where the managers are responsible for multiple functions, workers and also the relations with the community.
“Division vice presidents and their functional-area managers at Sonoco Products meet off-site for a full day with the division’s HR head to assess plant managers’ performance and potential for promotion to area management”, explain Conger and Fulmer. There, they don’t name certain successors but specify experience and performance matters that might influence one’s promotion. “The result is a pool of potential successors.”

Rule Three: Making It Transparent

The systems of succession planning systems are traditionally kept in secrecy. This has certain advantages; one of them is allowing last-minute changes without having to deal with anyone’s expectations or reactions. On the other hand, the potential successors can be the best source of information about their own skills and experiences. “And if they know what they need to do to reach a particular rung on the ladder, they can take steps to do just that”, elucidate Conger and Fulmer.
Some organizations let their employees know the exact position in the company’s succession system. Let’s take the example of Eli Lilly’s employees who know if they are considered to have an additional potential, although they are not familiar with the level of that potential or the position they are considered for.
As Eli Lilly does, many organizations manage their succession systems through the Web-based systems the employees can access through an icon on their computer desktops. It takes them to the Intranet portal containing everything from the internal phone book data to their personal information and job opportunities customized for each individual, while the organization’s HR managers assess these employees also using these tools. As Conger and Fulmer clarify, HR managers “can download a report showing what marketing positions are available and which candidates are being groomed for such positions. The names are linked to individuals’ online résumés, development plans…”

Rule Four: Measuring Progress Regularly

It needs to be monitored whether the right candidates are progressing fast enough to the right positions at the right time but also need to avoid - what Sonoco calls the ‘Roger Jones phenomenon’. Sonoco’s “divisional executives were having trouble developing their own candidates and would simply identify one of the company’s superstar performers as a potential successor. But when succession plans were consolidated at the corporate level, a single employee, Roger Jones, was found to be the potential successor for most of the key jobs at the company”, explain Conger and Fulmer.
It only takes a click of a button for Eli Lilly’s managers to determine the number of candidates ready for the company’s top 500 positions.
Eli Lilly’s managers can also avoid certain vulnerabilities by learning – with a click of a button - how many persons are candidates for more than three positions.

Rule Five: Keeping It Flexible

The old way of succession planning is quite rigid and the candidates don’t get on the list and off of it fluidly enough. While Sonoco integrated four software systems with the purpose to speed up the data updates and ensure data’s consistency, the hardware manufacturer Dell reduced the use of technology.
According to Conger and Fulmer, Jim Shanley after more than 20 years in Bank of America, adds: “You need a strong leadership development and succession process, but it is not the process that really makes the difference. Executives need to have a talent mind-set that allows them to feel comfortable talking about their A players as well as their low performers.” Shanley had corporate wide accountability for staffing, executive development and succession planning, organization development, leadership development and learning.

Sources:

Harvard Business Review: Developing Your Leadership Pipeline, available at